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Market Report – 31st December 2020


Faida Research - January 4, 2021 - 0 comments

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Market Commentary:

  • The All Share and NSE 20 Indices gained by 1.3% and 1.6% w-o-w to close the week at 152.11 and 1,868.39 respectively. Market turnover declined by 65.8% w-o-w to KES 466.9 million while the volume of shares traded declined by 483% to 23.0 million. Market capitalization closed the week at KES 2,336.7 billion, 1.3% higher than the previous week at KES 2,306.99 billion. The week’s net foreign inflow stood at KES 80.5 million from the previous week’s outflow of KES 179.2 million.
  • Annually, NASI shed 8.5% to close the year at 152.11. The NSE 20 share index was down 29.6% and closed the year at 1868.39. The NSE 25 share index declined 16.7% to close at 3415.24. Equity turnover declined by 3.3% to Kes.148 billion from Kes.153 billion posted as at 2019.Annual trading volumes increased to Kes.5.2 billion shares; up from 4.8 billion. The Market capitalization declined by 8.0% to close at 2.33 trillion against 2.5trillion posted last year. During the year, Safaricom was the top performing counter accounting for 48.2% of the total turnover. The Banking sector came in second with 38.0% and Manufacturing sector third at 9.8%. The top three sectors cumulatively accounted for 96.2% of the total market turnover.

 

 

News Highlights:

 

DTB Issues Profit Warning for FY2020 Earnings

  • The Board of Directors of Diamond Trust Bank (DTB) Group has announced that it expects DTB’s earnings for the FY2019 to be substantially lower than the earnings realized in FY2019, based on the estimates provided by its full year forecasts. According to the Capital Markets Regulations, listed companies are required to issue profit warnings when they expect projected earnings for the current financial year to be at least 25.0% lower than the earnings realized in the preceding financial year.
  • This implies that DTB expects earnings for FY2020 to be at least 25.0% lower in comparison to the after tax profit of KES 6.8 billion recorded in FY2019. DTB attributes the expected decrease in profitability to an increase in impairment provisions, restructured loans and delayed repayments associated with the financial distress brought on by the COVID-19 pandemic.
  • DTB, however, anticipates improved performance in future supported by its current long-term strategy (omnichannel banking proposition, innovation) and several initiatives put in place to enhance performance.

Commentary

  • We expect most banks to face a similar predicament in respect of FY2020 results. Other banks that have issued profit warnings due to the difficult operating environment include: Absa, KCB Group, HF Group, Standard Chartered and I&M.
  • Going forward, we anticipate the asset quality challenges (brought on by the pandemic) faced by banks to persist in FY2021. Moreover, with the suspension of charges for transfers between mobile money wallets and bank accounts we expected non-funded income to continue coming under pressure.

 

Recommendation:

LONG TERM BUY – KENGEN

HOLD – KENYA RE

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